economy
January 21, 2026
Income investors can find dividends and outperformance in the same corner of the market
Whether it's capital gains, dividend income or diversification, it pays for U.S. investors to look abroad.
TL;DR
- International stocks significantly outperformed the S&P 500 in 2025, with returns of nearly 29% for the iShares MSCI ACWI ex U.S. ETF compared to roughly 16% for the S&P 500.
- Individual countries like South Korea and Brazil saw even higher returns, with the iShares MSCI South Korea ETF surging 91% and the iShares MSCI Brazil ETF up 41%.
- The U.S. dollar's depreciation in 2025, influenced by fears of tariffs, concerns over spending, and lower interest rates, boosted international stock performance.
- International stocks are seen as undervalued compared to the S&P 500, which has a higher forward price-earnings ratio.
- International markets offer exposure to different sectors, such as financials and banks in Europe, and tech players in South Korea, contrasting with the U.S. market's concentration in tech.
- Financial advisors recommend an international allocation of 30% to 40% of a U.S. investor's portfolio.
- International stocks offer higher dividend yields, with some European markets providing yields exceeding 3% compared to the S&P 500's approximately 1.1%.
- ETFs like the iShares International Select Dividend ETF (IDV) and Schwab International Dividend Equity ETF (SCHY) offer diversified investment in overseas stocks with attractive yields.
- Investors can gain international exposure by rebalancing portfolios, adding new dollars to international positions through dollar cost averaging, or investing in ETFs.
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